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Growing Talent Management Firms: A Recipe for Failure

Thursday, February 19, 2015
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In previous posts, I outlined the necessary ingredients for successfully growing talent management firms:

  1. Financial health
  2. Value creation
  3. Special sauce
  4. Strong management
  5. Business development engine
  6. Scalability.

But what is the opposite of this formula? What is likely to happen if these ingredients are not included in both strategic and execution plans? Let’s call it a “recipe for failure.”
One can certainly argue that the absence of any one of these ingredients is likely to make it more difficult for any talent management firm to succeed. But what else can impede success? A couple of things quickly come to mind.

The “One Trick Pony”

Relying on one product or service, while not necessarily a doomsday scenario, is a leading indicator for slow growth. At the very least, there will be a ceiling that is very difficult to achieve.

Certainly, many firms are known for—and, in fact, built on—a single training product, software program, assessment inventory, or unique business service. But few, if any, have shown sustained growth without expanding their offering—even if that means creating off-shoots of their foundational program.

It is true that once a client has bought and used that offering, it will likely look for the next product or service from that same company, especially if they had a positive experience. Since we also know that the cost of obtaining business from a current customer is significantly less than finding a new one, it clearly behooves a supplier to continue to up-sell (and cross-sell) with new products and services.

The Guru or Heroic Founder

Another issue derives from a firm started by a guru who becomes the heroic founder that has long since reached his peak leadership performance capability or interest. Although the Peter Principle is alive and well, it is too often demonstrated in a relatively technical field, where the scientist/researcher/author has little to no competence in running and growing a sustainable business.

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Indeed, the very traits and capabilities resident in the entrepreneur founder are often those that get in the way of growing the business over the long haul. If the heroic founder can’t step away when it becomes evident his management competence has peaked, the die is cast—and the firm is sure to fail.

As you can guess, these organizations are ripe for take over. And what is the very first action of the acquiring company? You guessed it: Replace the founder who, admittedly, is not up to the task of growing the business.

The Next Best Thing

The third issue, which is very much related to the heroic founder problem, is that the leader tends to continually look for the “next best thing.” Never satisfied with simply improving what the firm has already created, the leader prefers to create what hasn’t yet been discovered. It is their entrepreneurial nature to chase bright shiny objects, and often many objects at once.

This lack of focus not only causes chaos among the organization’s workforce, but it also leads to an organization that pays little attention to what was the original product or service that lifted the company off the ground. As a result, the business becomes stale, it doesn’t keep pace with new customer needs, and it becomes vulnerable to competitive sniping.

The Cobbler’s Children

As the parable goes, the cobbler’s children often have no shoes. Similarly, talent management firms often ignore the talent management needs of their workers.

As organizations grow, they become increasingly dependent on the quality of the talent they acquire, develop, and hopefully retain. Meanwhile, the founders are either on to something bigger and better in their minds (The Next Best Thing failure), or they are no longer with the firm (The Guru or Heroic Founder failure). The irony of ironies is that a sure-fire recipe for failure is to ignore the talent management demands of its own talent management business.

No doubt, there are numerous other ingredients for failure among talent management firms—many of which aren’t unique to this industry. However, these four issues are likely to be fatal. What others have you observed or experienced?

About the Author

Dr. Cohen is a 40+ year veteran of the talent management industry having founded and/or led eight different business entities in the field. He currently is in private practice focused on strategic and business planning including senior leadership development. He also has served on 19 different advisory Boards for firms in the training and education sector helping them effectively navigate their growth strategies. He can be reached at: steve@strategicleadershipcollaborative or 952-942-7291 and his website is: www.strategicleadershipcollaborative.com.

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